Contingency Planning for a Downturn in the Economy

As a matter of good financial management, the ACT has provided advice to its members on contingency planning for a downturn in the economy.

Investment grade companies generally entered the current stage of the economic cycle with balance sheets in relatively good shape and having stocked up on un-drawn multi-year lines of credit during the years of easier availability. But even if a company is in good shape, it will still want to consider how its customers, suppliers, competitors and potential acquisition targets may be affected by a downturn and how they may respond.

The ACT’s Briefing Note looks not just at the financial fundamentals, including cash and balance sheet management, risk and funding availability, but also at how the business strategy and plans may need adapting to new circumstances - both defensively and also to take advantage of opportunities. Treasury plays a key role in this interaction between the business strategy of a firm and its financial strategy and policy.

Richard Raeburn, Chief Executive of the ACT said:

“Few in business have sufficient senior-level experience of previous downturns. Companies need to re-examine business plans at the strategic and operational levels and need to ensure they can survive any difficulties and are ready to exploit any opportunities. Setting out good practice at any stage of the economic cycle, this guidance note is essential reading for all those involved in managing a company, whether or not directly charged with financial management.”